Germany January final manufacturing PMI 45.0 vs 44.1 prelim

• Prior was 42.5

Key findings:

• HCOB Germany Manufacturing PMI at 45.0 (Dec: 42.5). 8-month high.
• HCOB Germany Manufacturing PMI Output Index at 46.3 (Dec: 41.7). 8-month high.
• Prices charged fall at slower rate as costs come close to stabilising

Comment:

Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“Fear of US tariffs, snap elections, and rising insolvencies are not exactly the recipe to end the recession in the
manufacturing sector. With such a tough environment, it is no surprise that the HCOB PMI for manufacturing is still in the
red, signalling a continuation of the downturn that has been going on since mid-2022. Even though the HCOB PMI has risen,
we would only expect a sustained stabilisation if it exceeds the 50 mark or shows at least three consecutive increases.”

“The drop in production in January was not as severe as in the previous seven months. Calling it a ray of hope might be an
overstatement, but several indicators show that the dramatic deterioration has slowed a bit. This applies to new orders, order
backlogs, and purchased quantities.”

“In a genuinely positive sign companies are looking to the future with much more
confidence, believing they might be producing significantly more a year from now. The Future Output Index reached its
highest level since February 2022. Some companies justify this optimism with the prospect of lower interest rates and hopes
that the economy will pick up after the parliamentary elections with a new government.”

“The destocking of purchased goods signals that an economic recovery will take some time. The rate of destocking remains
high and the inventory retrenchment phase is unusually long. Interestingly, Germany seems to have decoupled from the
global inventory cycle, as global stocks of purchases have hardly changed recently. This supports the idea that the
recession in German industry is more structural than cyclical.”

“The unchecked decline in manufacturing seems to have stopped. This applies to production and new orders, which had
been falling at a fast rate in the second half of 2024. The January figures suggest that the order backlog might be stabilising,
as this was the smallest decline since August 2022. The situation remains critical, but companies are far from capitulating.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.